Compensation received thru lawsuit

[JT2307]

Client won a lawsuit and was awarded one years salary. Insurance company reported it as 1099 - nonemployee compensation. Should this be subject to selfemployment tax? I think it should have been classified as other income. Why should they have to pay the employers portion?
Am I missing something?

[mactoolsix]

There is a lengthy discussion here in the IRS Lawsuits, Awards, and Settlements Audit Techniques Guide, chapter 3.

"There is general agreement that to the extent damages are excludable from gross income, they are not subject to employment taxes. Also, there is general agreement among courts that to the extent a settlement payment made by an employer or former employer represents back pay for services by an employee for the employer, such payments are wages for employment tax purposes. Rev. Rul. 96-65."

[Jiggers]

So it belongs on a W-2?